Affirm soars 21% on profit beat, more room for growth?

Affirm soars 21% on profit beat, more room for growth?
Published - May 13, 2022 @ 11:40 AM (EET)

Affirm Holdings Inc. (NASDAQ:AFRM), the technology-driven payments network,  reported better-than-expected revenue growth of 53.8% year-over-year to $354.8 million, topping estimates of $344.03 million.

Shares surged around 29% following the company's third-quarter results.

Continued Gross Merchandise Volume (GMV) grew 73% year-over-year to $3.9 billion, while Active merchants increased to 207,000 from a meager 12,000, driven primarily by the adoption of Shop Pay Installments by merchants on Shopify's platform.

Affirm also announced on Thursday a multi-year extension of its partnership in the U.S. with Shopify (NYSE:SHOP), cementing the firm as the exclusive provider of pay-over-time for Shop Pay installments.

Affirm expects GMV of $3.95 billion to $4.05 billion, revenue of $345 million to $355 million, and an Adjusted Operating Margin of 15% in the fourth quarter. 

For the year ended June 30, 2022, the company further expects revenue of $1.33 billion to $1.34 billion and adjusted operating loss to be 6.6%-7.6% of revenue, compared with its previous range of between 12%-14%.

"As we advance our strategy to drive growth, maintain attractive unit economics, and deploy superior risk management, we plan to achieve a sustained profitability run rate on an adjusted operating income basis by July 1, 2023" - Founder and CEO, Max Levchin of Affrim Holdings.


Affirm, one of the growth stocks that have suffered recently amid a more hawkish outlook from the Federal Reserve, rising inflation, and global economic uncertainty, witnessed its share price collapse more than 85% in the past six months. 

The firm, which is leading the global market with its BNPL services (buy-now-pay-later) that allow consumers to pay for items in equal installments over a specified period, is a high risk, high reward investment.

Yet to reach profitability, and given its fierce competition, there could be more actionable opportunities available on the stock market with the current tech sell-off.

POTENTIAL: The average Affirm Holdings price target of $69.87, suggests an 82% upside from current levels.

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